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Yanukovych to Keep Ukraine Grip as East Repels Divided Foes

Oct. 26 (Bloomberg) -- Ukrainian President Viktor Yanukovych’s ruling party is poised to retain control of parliament as supporters in his eastern heartland rally to quell challenges from a world boxing champion and a jailed ex-premier.

The Party of Regions, which rules the former Soviet republic in coalition with the Communists, leads by 7 percentage points before the Oct. 28 vote. Heavyweight titleholder Vitali Klitschko’s UDAR is second, with former Prime Minister Yulia Tymoshenko’s party third, having failed to team up in the battle for the 450-seat Verkhovna Rada in the capital, Kiev.

Yanukovych, 62, who’s roused ethnic Russians in regions around his native Donetsk by bolstering the status of the Russian language, trumpets stability, economic expansion and this summer’s Euro 2012 soccer tournament among his party’s achievements. While graft has worsened, European ties have soured and growth may reverse in the second half of the year, opponents have struggled since Tymoshenko was locked up in 2011.

“There’s no strong alternative to the Party of Regions in eastern and southern Ukraine, which determine the outcome of the elections,” Vadym Omelchenko, president of the Gorshenin Institute that researches social and political issues, said yesterday by phone from Kiev. “Voters are disoriented by the split opposition and it’s in the interests of the Party of Regions not to allow them to unite.”

Bonds, Stocks

Ukraine’s foreign-currency bonds have returned 24 percent this year, the most after Venezuelan debt, according to JPMorgan Chase & Co.’s EMBI Global Index, which gauges the yield difference relative to U.S. Treasuries.

Still, after expanding 5.2 percent last year and 4.7 percent in 2010, the economy will contract in the second half because of lower prices for steel, Ukraine’s main export earner, Erste Bank AG and HSBC Holdings PLC have predicted.

The Ukrainian Equities Index is down 46 percent this year, more than any benchmark in the world, data compiled by Bloomberg show. The hryvnia, which has lost 1.86 percent against the dollar in 2012, declined to 8.1914, to the lowest level since November 2009, as of 2:15 p.m. in Kiev from 8.1738 yesterday.

Russia, EU

Since coming to power in 2010, Yanukovych has presided over worsening ties with his two largest neighbors. Ukraine is haggling over the price of natural gas with Russia, which supplies more than half of its fuel needs. A planned Association Agreement with the European Union has been delayed indefinitely because of Tymoshenko’s imprisonment for abuse of office.

Her case, which she says was engineered by the president to keep her out of this week’s ballot, has boosted Yanukovych’s prospects. He denies involvement.

“We regret that the convictions of opposition leaders during trials that did not meet international standards are preventing them from standing in parliamentary elections,” U.S. Secretary of State Hillary Clinton and EU foreign affairs chief Catherine Ashton wrote Oct. 24 in the New York Times.

The Party of Regions was backed by 23.3 percent of voters, compared with 16 percent for Klitschko’s UDAR, 15.1 percent for Tymoshenko’s Batkivshchyna, and 10.1 percent for the communists, a survey by the Kiev-based Democratic Initiative Fund showed.

Twenty-four percent of voters are undecided, according to the Sept. 18-Oct. 4 poll, whose margin of error was 2.2 percent.

‘Establish Dictatorship’

“This is a war that could bring victory and a chance for change, or it could be an historical defeat,” Tymoshenko wrote to voters today on her website. “If Yanukovych wins, he’ll establish dictatorship and will never give power back peacefully.”

The EU has called on Yanukovych and his government to conduct fair elections, calling them “a litmus test” of Ukraine’s democratic credentials.

“The record number of observers that have come here from North America, Europe and Central Asia for this event underscores the importance we as the international community place on Ukraine’s democratic progress,” the Organization for Security and Cooperation in Europe, the Council of Europe, the European Parliament and NATO said today in an e-mailed statement. “We hope to see the citizens of Ukraine participate fully in Sunday’s vote.”

Ukrainian Prime Minister Mykola Azarov said the ballot would be free and fair.

‘Groundless’ Tales

“Any tales that elections could be rigged are groundless,” Azarov said today in a statement on the Cabinet’s website.

Tymoshenko’s Batkivshchyna party joined forces with Arseniy Yatsenyuk’s Front Zmin in April. While the nationalist party Svoboda signed a coalition pact with them Oct. 19, Klitschko, whose party’s name means punch, hasn’t followed suit.

“To sign any agreements before the elections is like building a house from the roof down,” Klitschko said Oct. 21 in the western region of Zakarpattya. “A coalition should be formed after entering parliament.”

Opposition politicians have sought to capitalize on worsening graft as Ukraine’s ranking in Transparency International’s Corruption Perceptions Index dropped to 152 from 134 under Yanukovych.

Making inroads into his core support, which in July cheered a Party of Regions-backed bill to make Russian a second official language in the eastern half and southern regions, may be tricky in the run-up to presidential elections in three years’ time, according to Kostyantyn Dykan, an analyst at the Razumkov Center for Economic and Political studies.

“It all points to Yanukovych being the main candidate for 2015,” he said yesterday by phone from Kiev. “The situation allows him to look to the future with optimism.”

To contact the reporters on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net; Kateryna Choursina in Kiev at kchoursina@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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